Regulating for independence

As legislation for WA’s proposed Economic Regulation Authority proceeds through Parliament, the spotlight will remain fixed on ultimate Government responsibility and how this plays out alongside an independent regulatory framework.

Independent State regulators must take heed of national codes which may be untested or about to undergo review, and this has already proven a contentious task for WA’s independent gas access regulator, Ken Michael, in preparing access arrangements for the Dampier to Bunbury Natural Gas Pipeline.

Opposition leader Colin Barnett attempted to determine the level of independence between the Government and Dr Michael during recent parliamentary debate on the ERA Bill, in an effort to highlight the potential carryover to a broader regulatory authority.

Mr Barnett concluded the Government, in particular Energy Minister Eric Ripper, had been naive in interpreting independence as lack of direction for the good of the State.

Employees of the DBNGP’s owner, Epic Energy, were also firmly of the belief the drawn-out process to achieve a final decision required some form of intervention from the Government, and twice approached members of Parliament.

Further questions were raised about the whole process, and the amount of early direction available, when the gas regulator’s office, OFFGAR, faxed information to Epic on the first Sunday in May, offering the opportunity of a response.

This was said to be in the cause of "procedural fairness", but was two weeks after a potential decision had been reported to be undergoing a final legal review.

Epic’s then strategy and business development director, David Williams said the OFFGAR fax contained information on which the office said it intended to rely, in presenting its final decision.

This information had not been put to Epic before, nor made public, but was adverse to Epic’s position, Mr Williams said.

It related to the sales process and was of such a nature Epic needed to speak with people involved with this, for clarification.

Epic had purchased the pipeline for $2.4 billion from the previous Government in 1997, and some of those involved in the deal were no longer in Perth, or employed in the same capacity.

Epic had not wanted to delay the decision any further, but needed two weeks to acquire the information it needed and to form a response.

The whole process, including a Supreme Court challenge on points of law regarding the draft decision, meant Epic had just four months remaining before it needed to secure significant last-ditch re-financing.

Industry was saying it could not move forward on plans involving extra gas capacity through the line, and those wanting to participate in Western Power’s power procurement process were unable to obtain certainty from Epic regarding expansion timeframes, let alone tariffs.

Meanwhile existing customers with capacity, and those with alternative fuel sources, were basking in the advantage.

Mr Barnett described the draft tariffs decision as "out of whack" and "de-stabilizing", underscoring the need for direction on the interpretation of fine detail, and on a range of prices, and legislation establishing time periods.

The problem was not one made of the sales process nor of the regulator, Mr Barnett maintained, but one for which the Government of the day held responsibility for addressing.

Support for further discussion on Government direction and responsibility for those employed under the Economic Regulation Authority Bill has come from UnionsWA secretary Stephanie Mayman.

Ms Mayman has criticised proposals in the Bill which she believes could foster similar situations to the pipeline uncertainty.

"While some independence is clearly necessary, there has to be some capacity for Government involvement where the interests of the State might conflict with the interests of the market," she said.

"The … problems with respect to the gas pipeline are a perfect example of a situation where Government intervention can be justified to protect the best long-term interests of the State."

The proposed Economic Regulation Authority will have responsibility for gas, electricity, water and rail regulation within WA.

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